Hnbs 102 Managing Financial Resources and Decisions
- Submitted by: linn
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- Date Submitted: 11/18/2015 05:54 AM
- Pages: 9
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Introduction
During this essay I'll be examining how and where to access sources of finance for a business, and the skill set used analysing financial information for decision making.
In business Finance is obviously important for operation, development and growth. Finance is the lifeblood of business. It can be said that finance can be the most important part of a business enterprise
Before the type of finance is selected, sources of finance must be assessed after considering the following specifics relates to the business itself and the source: exactly how much money is needed and in what time, what exactly is the charges for the source (rates of interest, dividends etc.), the risk involved, the timespan of the contract (between company and supplier of finance), the control of the business over the source or over the ability to pay back finance received so the gearing ratio of the business (the relationship between what is owns and what is owes). Eg, long term loans and ordinary shares can produce greater amount of capital compared to personal savings or the sale of assets. But although the company must repay in time the amount borrowed from a bank it can have as continuing capital the money invested by shareholders. Also, while the rate of interest is fixed and included in every payment, dividends are paid only when the company generates profit. Therefore, the company has more control over finance if is source are investments rather than bank loans
The mentioned sources carry simultaneous advantages and disadvantages for the business personal savings are 0% interest, do not need to be returned necessarily at a particular time, zero collateral part is included and no paper-work is required, but it cannot provide vast amounts and can interfere unexpectedly with cash flow if money is demanded before due time. Retained profit is the company’s own revenue which doesn’t have to be returned or to pay interest, debt does not increase and its future allocation may...
During this essay I'll be examining how and where to access sources of finance for a business, and the skill set used analysing financial information for decision making.
In business Finance is obviously important for operation, development and growth. Finance is the lifeblood of business. It can be said that finance can be the most important part of a business enterprise
Before the type of finance is selected, sources of finance must be assessed after considering the following specifics relates to the business itself and the source: exactly how much money is needed and in what time, what exactly is the charges for the source (rates of interest, dividends etc.), the risk involved, the timespan of the contract (between company and supplier of finance), the control of the business over the source or over the ability to pay back finance received so the gearing ratio of the business (the relationship between what is owns and what is owes). Eg, long term loans and ordinary shares can produce greater amount of capital compared to personal savings or the sale of assets. But although the company must repay in time the amount borrowed from a bank it can have as continuing capital the money invested by shareholders. Also, while the rate of interest is fixed and included in every payment, dividends are paid only when the company generates profit. Therefore, the company has more control over finance if is source are investments rather than bank loans
The mentioned sources carry simultaneous advantages and disadvantages for the business personal savings are 0% interest, do not need to be returned necessarily at a particular time, zero collateral part is included and no paper-work is required, but it cannot provide vast amounts and can interfere unexpectedly with cash flow if money is demanded before due time. Retained profit is the company’s own revenue which doesn’t have to be returned or to pay interest, debt does not increase and its future allocation may...